This is one of those questions you hope that you never have to ask. However, sometimes despite how careful you are, life can be unpredictable and you may find yourself lacking the funds you need to make a house payment. So what happens if you skip a mortgage payment for just one month. Don’t worry there is no need to panic yet, but there are consequences to missing a mortgage payment that you should know about.
What if you’re late on your mortgage payment?
Every home loan agreement offers borrowers a grace period for late payments. Typically, there is a 15-day grace period, in which case you would have 14 days after your payment is due to pay your bill without incurring a late fee. However, it is best to check your policy because late fees can start applying sooner than the 15-day grace period.
These late fees are based on your mortgage agreement, loan type, and state regulations, but generally, the average is 4%-5% of the overdue payment. So, for a $1,000 monthly mortgage with a 5% late penalty, the fee would be $50. That may seem like in a drop in the bucket, but late fees are a good source of income for mortgage lenders.
How this affects your credit
Mortgage lenders typically report late payments to credit bureaus after they become 60 days past due. This means you usually have two months to make up for a missed payment. After the 60-day mark, your credit score might take a big hit.
According to data from credit analysis firm FICO, someone with an excellent credit score of 780 or above could see it drop 90 to 110 points if the person has never missed a payment on any credit account. In comparison, someone with a 680 credit score and two pre-existing late payments on their history may see a 60 to 80 point drop.
